A WEEK OF IMPORTANT TURNS IN MIDDLE EASTERN POLITICS

Revulsion against terrorist murder realigned Middle Eastern politics this week in a series of developments with ramifications for the oil and gas industry.

On all sides, political leaders seem to have had their fill of indiscriminate killing by suicidal fanatics.

The turning point came after bombings killed 25 people in Jerusalem and Haifa during the weekend of Dec. 2-3, prompting retaliatory air strikes by the Israeli military. The militant group Hamas claimed responsibility for the bombings, saying they avenged the earlier killing of one of its leaders by Israeli forces.

The bombings and Israeli retaliation turned the week into the bloodiest in 14 months of conflict.

The violence also pushed the US into a new position in the Israeli-Palestinian clash and raised potentially fateful pressure on Palestinian Authority Pres. Yasser Arafat.

Abandoning the aggressively balanced approach of Sec. of State Colin Powell, the Bush administration strongly backed Israel's right to defend itself against terrorism without backing away from its earlier support for a Palestinian state.

An analysis by the Eurasia Group, New York, notes that Powell has wanted to keep Hamas and other Palestinian terrorist groups separate in US policy from Al-Qaeda, the network responsible for the Sept. 11 attacks in New York and Washington, DC. Powell fears that citing terrorism to link groups focused on the Palestinian cause with Al-Qaeda would alienate US allies in the Middle East.

Under the Powell strategy, prevalent until now, the US responded to terrorist attacks in Israel with expressions of regret balanced by calls for Israeli restraint.

There was no such call this week. Along with the statement of support for Israeli self-defense there were the strongest US demands yet for Arafat to stop the violence and - in a very significant move - a freezing of assets of three groups accused of funding Hamas.

The turn put the US on a course advocated by Defense Sec. Donald Rumsfeld and National Security Council Advisor Condoleeza Rice, who are more inclined than Powell is to confront terrorism on all fronts. And it put Arafat in a jam.

After the weekend bombings, the Palestinian leader arrested 180 members of Hamas and another terrorist group, Islamic Jihad. But he has arrested terrorists many times before. Israel Prime Minister Ariel Sharon quickly dismissed the latest moves as ineffectual.

After the initial arrests, Arafat's police placed Hamas founder Ahmed Yassin under house arrest in Gaza City. Violent clashes erupted between the police and Hamas supporters. At least one Hamas supporter was killed.

The battles highlighted Arafat's weakening position among Palestinians. And it put him the politically dicey position of seeming to have taken instruction from the Israeli government.

His political problem grows from the emergence of what Palestinian political scientist Khalil Shikaki, in an article to appear in the January-February 2002 issue of Foreign Affairs, calls a "young guard" seeking unilateral Israeli withdrawal from the West Bank and Gaza.

Shikaki describes the young guard as a disaffected group within the Palestinian nationalist movement. In addition to Israeli withdrawal from the occupied territories, the young guard accuses Arafat and his cronies of ineffective leadership and wants to replace them. Shikaki, a professor at Bir Zeit University and director of the Palestinian Center for Policy and Survey Research in Ramallah, says the young guard started the current round of violence in September 2000.

He calls this split within the nationalist movement one of two important trends to emerge during the uprising-or intifada. The other trend is a decline in power of the nationalists relative to Islamists, including Hamas and Islamic Jihad.

So Arafat faces not only internal challenges to his leadership but also the growing threat of Palestinian civil war.

"In fact, at this point only the prospect of a truly viable peace process and serious [Palestinian Authority] commitment to good governance can provide Israel and the old guard with an exit strategy for their current predicaments," Shikaki writes.

To the oil and gas industry, how oil-producing countries of the Middle East respond to all this will be critical. Signs this week indicated that the Rumsfeld-Rice urge to confront terrorism on all fronts isn't as incendiary among US Middle Eastern allies as Powell feared.

Post reporter Howard Schneider noted that leaders of Jordan, Egypt, and Saudi Arabia had avoided direct criticism of Israeli retaliation against the suicide bombings. The leaders called on both sides to curb violence.

A Saudi prince quoted by Schneider made a statement that can firmly align the world's most important oil-producing country with international sentiment to the extent it represents thinking of the whole Saudi monarchy.

"It has gone beyond blaming, and it is time to stop," said Prince Turki al-Faisal, former Saudi intelligence minister. "When you see pictures of body parts spread all over the place it makes you sick. Who the hell is Sharon or Arafat to cause their people this suffering?"

That kind of disgust for senseless killing can be a unifying force. Here's hoping it continues.